Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Signet Jewelers Limited (NYSE:SIG) share price is up 67% in the last year, clearly besting the market return of around 22% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 21% in the last three years.
See our latest analysis for Signet Jewelers
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year Signet Jewelers saw its earnings per share (EPS) drop below zero. While some may see this as temporary, we’re a skeptical bunch, and so we’re a little surprised to see the share price go up. It may be that the company has done well on other metrics.
Unfortunately Signet Jewelers’ fell 15% over twelve months. So using a snapshot of key business metrics doesn’t give us a good picture of why the market is bidding up the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Signet Jewelers
A Different Perspective
It’s good to see that Signet Jewelers has rewarded shareholders with a total shareholder return of 67% in the last twelve months. There’s no doubt those recent returns are much better than the TSR loss of 9% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Signet Jewelers is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning…
Signet Jewelers is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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